Daily FX Update, 01 April 2016

OVERNIGHT MARKET UPDATE:

·         US – The Chicago PMI and ISM Milwaukee series continued the theme of improvement across the regional PMIs in March. The Chicago PMI rose 6 points to 53.6 in March, with four of the five components in the survey improved. Any reading over 50 indicates improving conditions.

·         US – The initial jobless claims deteriorated in the week of 26 March, with the number of Americans who applied for unemployment benefits rose by 11,000 to 276,000.

·         Euro area – The March headline HICP fell 0.1% y/y. Core edged up to 1.0% y/y from 0.8% y/y in February. Services inflation (44% of the index) rebounded to 1.3% y/y from 0.9% y/y, but non-energy industrial goods inflation (27% of the index) fell to 0.5% y/y from 0.7% y/y. 

·         UK – The Q4 current account data showed that the deficit surged to GBP32.7 billion, equivalent to 7% of GDP and the highest since records began. The widening was driven by an increased deficit on investment income which rose to GBP12.8 billion and was due to negative interest rates in Europe, weak bank stocks and low dividend payments.

·         Currencies – Month and quarter-end continued the weak USD theme, most evident against EUR. GBP weakened as the current account blew out.

·         Equities – European equities closed in the red, with falls ranging between 0.5% and 1.3% for the majors, with losses attributed to falling bank stocks. US markets ended the session mixed, with Dow and S&P500 closed 0.2% lower.

·         Rates – USTs have rallied across the curve, with the 10-year yield down 5 bps to 1.77%. European sovereign bond markets were mixed. Moves in French and German bond yields were only minor, while UK 10-year yield falling 2 bps.

·         Energy – Brent registered slight gains while WTI was flat. According to Bloomberg data, OPEC crude production rose to 33.09mb/d in March, boosted by both Iran and Iraq production. 

·         Precious Metals – Gold prices were slightly higher as traders braced for the March jobs report. The slightly weaker USD also provided some support to gold prices.